Apps put NSW taxi 'monopoly' in doubt

The O'Farrell government is considering smashing the virtual monopoly in the taxi industry as smartphone apps and new technology have emerged as popular — and in many cases superior — booking and payment methods.

Three grabs of the GoCatch app which lets users pay by PayPal and soon credit card.

The apps including Ingogo and GoCatch are touted as more convenient, reliable and cheaper for consumers through lower transaction fees but the taxi industry says they are unsafe.

At a Transport for NSW stakeholder forum last month Fred Lukabyo of Cabcharge-owned Combined Communications Network distributed photos of a chaotic taxi rank in Kampala, Uganda, arguing Sydney would become like that if regulations were reduced, according to several who attended.

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Australians spend about $4.5 billion a year on taxi fares and for decades Cabcharge and Premier have effectively controlled the industry, with fat profits protected by government regulation.

This includes laws that force taxi operators to join an "authorised" radio network, most of which are owned by the two big players, for bookings.

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University of Sydney economist Peter Abelson said Premier and Cabcharge were so interlinked that "it's not really a duopoly, it's almost a monopoly and between them they control about 80 per cent of the cabs on Sydney streets".

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Transport for NSW is reviewing taxi network regulation and in documents presented in the closed-door forum on October 16 revealed it was "considering whether mandatory network membership for taxis should be continued".

The taxi industry lobby has distributed this picture of a Kampala, Uganda taxi depot arguing Sydney will look like this if regulation is reduced for apps.

Network bookings represent about 20 per cent of hirings in Sydney and 65 per cent in country areas but Transport for NSW said customers distrusted these networks, did not feel in control of the process when told their taxi would be "first available" and would like greater transparency on wait times.

It noted that by comparison apps such as Ingogo and GoCatch allow passengers to contact drivers directly, track the cab's location on a GPS map and rate their drivers, while offering drivers new ways to find work.

Ingogo provides Android smartphones with magnetic stripe readers to drivers allowing them to accept credit cards without using the Cabcharge system.

And in a direct threat to the dominant Cabcharge payment system, Ingogo gives drivers a smartphone connected to a magnetic stripe card reader that allows them to accept credit card payments, while GoCatch offers PayPal payment and will soon accept credit cards. Both are beginning to work with corporate clients and are undercutting the incumbents on fees.

Other apps allowing people to book and pay for private hire cars electronically, such as Uber and Dash, are just getting off the ground in Sydney.

The apps are touted as being more convenient, reliable and cheaper for users through reduced fees but the taxi industry says they're unsafe.

Dr Abelson said the requirement of taxi operators to join a network such as Taxis Combined meant they could not develop their own business, goodwill and marketing and the networks imposed large fees and other onerous requirements.

"Essentially the networks, because there are only two or three of them, effectively they can pretty much determine the conditions," he said.

Cabcharge reported taxi service-fee revenue of $87.3 million in the financial year to 2011, most of which is generated in Australia. Choice awarded Cabcharge a "shonky award" for 2012 because its credit-card surcharge is a hefty 10 per cent.

Taxi-industry vested interests have lobbied heavily against the competing apps. Benjamin Wash, CEO of the Queensland Taxi Council, said the apps "place the public at risk for the sake of profits". He said the apps placed customers at risk of "fraud, physical assault or worse" and did not conduct proper background checks.

Peter Ramshaw, CEO of industry body the NSW Taxi Council, said the "unauthorised" taxi booking apps were "a form of deception, relying on the taxi industry's reputation for safety without the need to comply with any of the regulations or the degree of accountability that makes the industry safe in the first place". Premier and Cabcharge, which have released their own apps, refused to comment, saying they were represented by the Taxi Council.

But Ingogo and GoCatch both claim to verify taxi drivers and customers and believe their system is safer than hailing a cab off the street where passengers don't know who is behind the wheel. The two companies said they had signed up 1000 and 10,000 drivers respectively and job volumes were increasing exponentially.

"At the moment if you catch a taxi on the street you've got no idea who the driver is and the driver doesn't know who the passenger is, but with GoCatch we keep a location-based driver record of every job that goes through the system," said founder Andrew Campbell.

Ingogo managing director Hamish Petrie, who founded Moshtix before selling it to News Limited, said the taxi council and networks were "fear mongering" and using unfounded safety issues to protect their interests. He said Ingogo scans and records all taxi drivers' licences and authorities and all drivers must log in with their taxi plate and registered mobile number which is provided to the passenger.

"Ingogo track exactly who got into which cab, with which driver, when, where to and how much they paid," he said.

Transport for NSW said it was considering whether to regulate apps and Petrie said he supported an app-based licence that covered security, reporting, lost property and complaints-handling standards.

"We're highly efficient in what we're doing and obviously we can run at a lot less cost and on a much smaller margin ... but if they tried to operate the way we're doing with their current infrastructure Cabcharge's stock price would be 10 per cent of what it is now and that's why they're lobbying so hard because they've got an incredible amount to lose from us being successful."